Title_ Small Businesses in Kenya: Transition from Informal to Formal Enterprises

Author_ Jacob C. NG’ANG’A & Anne GITONGA

Pages 167-189

Abstract_ The Kenyan economy is broadly characterized by twoparallel sectors: the formal comprised of registered businesses andthe informal defined by the economic activities of non-registeredbusinesses. Despite the several advantages of registering abusiness, only a minority of businesses in Kenya are registered.This paper addresses the question of why a large number of smallbusinesses in Kenya opt to operate informally. The findings showthat firm age, size of business, owner’s experience, business sector,gender of owner and type of business premise influence the choiceto register a business. The paper recommends that the governmentsimplify registration and link it to licensing, decentralize andautomate registration, and enforce registration without directlylinking it to tax obligations.

Keywords_ Small businesses, Registration, Informal sector